Major League Soccer’s Money Problems

In 2009, Herculez Gomez was getting ready to sign a new contract with the Kansas City Wizards, a Major League Soccer team. But the twenty-seven-year-old forward, who was the league’s top scorer just a few years earlier, had struggled in recent seasons. Unhappy with the terms offered by the Wizards—seventy thousand dollars a year for four years—he left M.L.S. and signed a six-month contract with the Mexican club Puebla. Gomez co-led the league with ten goals that season, and he has since played for Pachuca, Estudiantes Tecos, Santos Laguna, and Tijuana. Sometimes he earns more than seventy thousand dollars a month.

Still, Gomez, who was born in California and earned a spot on the 2010 United States World Cup squad, hoped to return to M.L.S. But he found his path stymied, because his former club team, now named Sporting Kansas City, owns his rights in perpetuity. If another team wanted to acquire Gomez, it would need to make a trade with S.K.C. “Kansas City has his rights, which is insane, because they didn’t want him,” Jimmy Conrad, a former Wizards defender, said. “That is bullshit. From the players’ side, there’s a real lack of common sense and almost unfairness in some of these things.”

While the league’s grip on player movement and salaries is frustrating to athletes, it is also key to maintaining financial stability. U.S. Soccer’s previous attempt at a professional league, the North American Soccer League, captivated the country in the nineteen-seventies but collapsed after massive contracts were given to players like the New York Cosmos’ Pelé and Franz Beckenbauer, and the Los Angeles Aztecs’ George Best. Hoping to avoid a similar outcome, M.L.S. has focussed on containing costs, beginning with its “single-entity” structure, in which individual teams operate as franchises under the M.L.S. umbrella. The league, not the teams, controls all player contracts. Unlike other American sports leagues, there is no free agency.

The rules mean that players aren’t paid much—something they would like to change. In 1996, eight players filed an antitrust suit against the league. After the case was concluded in favor of the league, in 2002, the Major League Soccer Players Union was formed to negotiate the league’s first Collective Bargaining Agreement. In 2010, negotiations threatened the beginning of the season and ultimately required a federal mediator to reach a deal that included the creation of a “Re-Entry Draft,” which allows a small portion of the players to switch teams if they meet certain conditions, including age and M.L.S. experience. “I don’t think everyone felt overly satisfied, but there was a nice compromise,” Conrad said.

The next round of negotiations begins soon, and now M.L.S. finds itself in a more stable place. Average attendance has grown to nearly nineteen thousand fans per game—around three thousand more than when the last deal was signed, and more than the N.B.A. or the N.H.L. The popular Montreal Impact, Portland Timbers, and Vancouver Whitecaps joined the league. Orlando City and a New York City team, N.Y.C.F.C., are set to enter in 2015. Last month, M.L.S. announced that its twenty-second team will start in Atlanta in 2017, with Arthur Blank, the owner of the N.F.L.’s Falcons, paying a seventy-million-dollar fee to the league.

M.L.S. still isn’t profitable, but it’s headed in the right direction. A 2013 Forbes survey estimates that eleven teams are worth more than ninety million dollars, and ten are making a profit. M.L.S. recently purchased Chivas USA—which finished the 2013 season last in attendance and second to last in the standings, and didn’t ink a local television deal until late August—for around seventy million dollars. In 2008, the average franchise was valued at thirty-seven million dollars. Meanwhile, the league’s television contracts are expanding, and its commercial activities are, too, through the league’s Soccer United Marketing agency, which manages properties in North America, including the U.S. national teams. “S.U.M. is a very successful marketing organization,” Andrew Zimbalist, a sports economist at Smith College, told me. In 2011, Providence Equity Partners reportedly bought twenty-five per cent of S.U.M. for between a hundred and twenty-five and a hundred and fifty million dollars.

The influx of cash, and a few free-spending owners, has led to some high-profile contracts. Each team can have up to three so-called designated players, who can be paid an unlimited amount with only a small fraction counting against the league’s salary cap of three million dollars. This seven-year-old rule allows teams to spring for star players who would otherwise stay in more lucrative international leagues. Last August, the Sounders committed thirty-three million dollars to bring back the American Clint Dempsey from the English Premier League. In January, Toronto F.C. paid nearly a hundred million dollars for the rights to the English forward Jermain Defoe and the U.S. national team star Michael Bradley.

In April, the Major League Soccer Players Union released its latest survey of compensation for all players in the league. While the average M.L.S. base salary, including those of designated players, exceeds a hundred and eighty-six thousand dollars, roughly eighty per cent of the league makes less than that. The median salary sits at eighty thousand dollars—up just ten thousand dollars since 2007. The league’s total payroll rose twenty-one per cent in the past year, but Bradley and Defoe’s contracts account for more than half of that growth. The top seven players together earn more than thirty per cent of the total guaranteed compensation, up from twenty-four per cent a season ago. By comparison, the top seven earners in Major League Baseball make four and a half per cent of the total. M.L.S., in other words, has an income distribution that highly favors élite players.

Despite the income inequality among players, the M.L.S.P.U. is unusually united going into next year’s negotiations. The union knows that the new Collective Bargaining Agreement represents its best opportunity to make meaningful steps toward full free agency. The new owners of the Orlando and New York teams would like to avoid beginning their tenure in M.L.S. with a strike or a lockout. The same goes for the league’s television partners. And the M.L.S. doesn’t want to lose any momentum it gains from this summer’s World Cup.

There are also limits to what the players can achieve, and what league management can afford to give without jeopardizing the future of M.L.S. “They can negotiate more freedom to change teams, longer training period before season starts, and better hotels,” Zimbalist said. “There are always things that you can negotiate over. But the notion that you’re going to be able to turn a hundred-thousand-dollar salary into a six-hundred-thousand-dollar salary isn’t one of them.”

Even so, the players are digging in, and so are the owners. A short strike eight months from now wouldn’t cripple the league permanently. “Look, if it’s a work stoppage that lasts for two years, maybe they can’t survive it,” Zimbalist said. “But I’m not expecting that. I would expect one that misses a third of the season or a quarter of the season. Absolutely, they can withstand that.”

M.L.S. officials declined to comment for this story, pointing to a previous statement from Don Garber, the league commissioner, that in part read, “We’re mindful, as are the players, that this will be a challenging process, no different than it was five years ago. I’m very confident that our owners and our players are very, very committed to doing everything possible to ensure that we grow this league together.”

A year ago, Garber held a question-and-answer session for fans on Twitter. Herculez Gomez asked why his rights were still owned by Kansas City. He was tweeting from Mexico.